What does Coinbase’s IPO mean?

Coinbase, the world's first digital currency exchange, was listed on the Nasdaq with an issue price of US$250. It opened at US$381 and rose to a high of US$421 during the session. Its market value once reached US$112 billion. It closed up 31.31% on the first day, and its trading volume in the U.S. stock market that day was second only to Tesla.

Many cryptocurrency investors around the world view April 14 as a watershed moment in the digital asset sector, a milestone event in the history of cryptocurrency.

COIN's debut in the traditional financial sector is considered a major step for the cryptocurrency industry, mainly because it provides investors with an opportunity to indirectly get exposure to cryptocurrencies. Jelle Pol, project director of Shell's blockchain project, said that Coinbase's direct listing is an interesting wake-up call for those who still insist that "everything about cryptocurrency is bad."

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"Thank you Satoshi, whoever you are." A few hours before the listing, Fred Ehrsam, former co-founder of Coinbase, posted this tweet to thank Satoshi Nakamoto. Founder and CEO Brian Armstrong also paid tribute to Satoshi Nakamoto. He mentioned Satoshi Nakamoto in the Coinbase listing prospectus and attached the address of Satoshi Nakamoto's wallet.

In fact, with the listing of Coinbase, which can bridge the gap between the traditional financial sector and the cryptocurrency sector, more and more mainstream participants seem to be optimistic about COIN. One of the important conditions supporting Coinbase's market value is its identity as a "gatekeeper" in the cryptocurrency market.

We have to admit that Coinbase actually determines the success or failure of most cryptocurrencies. In terms of the role it plays in the industry, although digital fields such as Bitcoin and blockchain are madly promoting the banner of "decentralization" and "de-control", Coinbase can play a certain degree of "gatekeeper" role in them. They can decide which digital currency to bring to the market for public trading, and this decision will lead to huge fluctuations in the prices of related digital currencies.

We can learn that Coinbase's cash flow in 2020 was $3 billion, of which $2.7 billion came from the custody funds provided to customers. From a business model perspective, Coinbase's transaction fee rate is 1.4%, and 85% of its revenue comes from transaction fees. In addition, Coinbase provides users with services such as deposits and mortgages, and pays deposit interest for users. In the future, it will launch savings cards, and users who use savings cards will receive Bitcoin. However, subscription fees account for a small proportion at this stage. Coinbase's business model is feasible, with profits of approximately $730 million to $800 million in the first quarter of 2021, exceeding the old financial technology giant Square, which is something that many growing companies on the market cannot do.

The huge exchange user group has laid the foundation for Coinbase's future trading in the stock market. According to the data from the first quarter, the platform has 56 million verified users, a 30% increase over the whole of last year, 6.1 million monthly trading users, a 117.86% increase, and 223 million platform assets, a 146.94% increase, accounting for 11.1% of the cryptocurrency market.

Another important condition supporting Coinbase's market value is its emphasis on compliance, which is another important reason for its recognition by the mainstream market. It can be said that it is the exchange with the best compliance and the most complete licenses among the existing exchanges.

As the first Bitcoin exchange in the United States to hold a formal license, Coinbase recently hired Morgan Stanley's global anti-money laundering consultant Ian Rooney as head of corporate compliance. Rooney will lead Coinbase's corporate compliance team to adapt to the series of heavy anti-money laundering (AML) rules faced by virtual asset companies required by the Financial Action Task Force (FATF).

Brian, founder of Coinbase, said that the decade of cryptocurrency began with complete unregulated development, and Coinbase was the first cryptocurrency company to take regulation seriously because they believed it would promote long-term adoption. In his opinion, there is no unified solution for how to regulate cryptocurrency in the world, and cryptocurrency needs to face many different types of regulators. However, the decentralization of cryptocurrency continues to develop rapidly, and the use of non-custodial wallets, DEX (decentralized exchanges), Defi and dapps has increased. The decentralized nature of cryptocurrency requires a completely new regulatory framework.

Forbes contributor Mao Buboo believes that Coinbase's listing continues the cyclical law of the bull market and may even bring about an eternal bull market, because the characteristics of digital currency are destined to make the crypto world evolve faster than the Internet of that year.

Roger Lee, one of Coinbase's investors in 2017 and a partner at venture capital firm Battery Ventures, believes that the correct approach to evaluating Coinbase is to imagine what the Internet world was like before Netscape developed a browser in 1994 and opened the door to the Internet world for ordinary people. Similarly, Coinbase brought a complex technology like digital currency to the public, allowing ordinary people to understand this new world and have the opportunity to participate in it and make profits from it.

Regardless, this is a day that we all need to remember.